Start Investing Early: The Power of Compound Interest

Compound Interest: Why Starting Early Matters Investing can seem daunting, but understanding compound interest is key to building wealth. A recent TikTok video by Mia McGrath illustrates this perfectly. McGrath uses a straightforward comparison of two individuals, Person A and Person B, to demonstrate the power of early investment. Person A starts investing £500 per month at age 18 and stops after 10 years. Person B, on the other hand, begins at 28 and continues until age 60, investing the same amount. Both receive a 7% annual return. The results are striking. By age 60, Person A has accumulated £825,000, while Person B, despite investing for a longer period and a larger total amount, only reaches £740,000. "Even though Person B invested for a longer period and more money, they ended up with £85,000 less than Person A," McGrath explains in the video. This highlights the significant advantage of early investment due to the compounding effect of interest earned on interest. While McGrath emphasizes that it's never too late to start, her example powerfully underscores the benefits of beginning early. The video's popularity on TikTok suggests a strong public interest in understanding these financial principles.